By Molly Burke and Megan Fan Munce, SAN FRANCISCO CHRONICLE
https://www.sfchronicle.com/politics/article/home-insurance-california-bill-19743241.php
This year may go down as the most impactful for insurance regulations in California in more than three decades. But few of those reforms will have come from the Legislature.
Several bills would have addressed issues ranging from the California FAIR Plan’s finances to the wildfire risk models that insurers use to determine where they write policies. But few passed before the Legislature adjourned at the end of August, and none of those had been signed by Gov. Gavin Newsom as of mid-September.
“This year, the focus has really been on regulatory and administrative changes” rather than legislation, said Deputy Insurance Commissioner Michael Soller. “Executive action has been the priority for addressing the insurance crisis.”
Last year’s legislative session was punctuated by a last-ditch effort to institute new insurance reforms before it ended. By that time, major insurers State Farm and Allstate had stopped writing new homeowners policies in California, and the number of residential policies carried by the FAIR Plan — California’s insurer of last resort — had more than doubled, from just under 154,500 in 2019 to more than 320,000.
That effort failed to meet the deadline to submit legislation. But its basic premise — allowing prices to rise for all Californians in order to increase accessibility in fire-prone parts of the state — is reflected in what Insurance Commissioner Ricardo Lara has termed the Sustainable Insurance Strategy.
That strategy is set to be enacted by December. The state Legislature, including newly elected members, will be back in session on Dec. 2.
State Sen. Bill Dodd, D-Napa, said lawmakers wanted to give the Sustainable Insurance Strategy a chance to effect change before turning to legislative action.
“I think there are some things that we can do to streamline the system and to protect homeowners, but until we have a stable insurance market in the state of California, frankly all we’re doing is adding more things that aren’t helping the situation,” Dodd said.
Some of the proposals that passed the Assembly this year but didn’t get a final vote in the Senate would have made changes in line with the Sustainable Insurance Strategy.
AB2996 by Assembly Member David Alvarez, D-Chula Vista, would have authorized the California Infrastructure and Economic Development Bank to issue bonds to help reinforce the FAIR Plan’s finances.
Another, AB2416, introduced by Assembly Member Damon Connolly, D-San Rafael, would have required the Department of Insurance to regularly revisit its home hardening reforms.
The bill made it past the suspense file hearing, during which dozens or even hundreds of bills were killed, but it did not pass the Senate.
Connolly said he couldn’t explain why the legislation was not brought up at the end of the session, even after receiving official support from Lara.
“It warranted getting across the finish line, so it disappointed particularly people in my district, which … is really being affected by these wildfire risks, as well as the increasing unavailability and unaffordability of insurance,” he said.
Neither bill was opposed by the insurance industry, according to Rex Frazier, president of the industry group Personal Insurance Federation of California. But neither would have had a meaningful impact on consumers, according to Carmen Balber, executive director of the advocacy group Consumer Watchdog. Soller said the insurance department is “absolutely committed” to updating and enhancing its home hardening regulations, even without a legislative mandate.
One bill that did spark controversy was SB1060, a proposal by state Sen. Josh Becker, D-Menlo Park, that would have required insurers to use wildfire models that reflect the work that homeowners and communities do to reduce their fire risk.
“The clear problem that homeowners are facing today is that they could spend tens of thousands of dollars protecting their home from wildfire and still have their home insurance nonrenewed, and that is not a sustainable state of affairs,” Balber said. “Sen. Becker’s bill would have begun to close that gap.”
Becker’s legislation passed the Senate, but was pulled in the Assembly, where it faced opposition, he said.
Frazier said industry members thought the initial version of Becker’s bill was overly stringent, requiring them to include information for which statewide databases do not exist.
“Obviously I’m disappointed,” Becker said, adding, “We certainly believe that there’s enough data out there.”
But he said he was in favor of efforts to gather and share data about mitigation practices such as prescribed burns and defensible space compliance.
He plans to reintroduce his legislation when lawmakers reconvene next year.
Frazier said the industry would be open to using mitigation data in its wildfire models as soon as the necessary databases exist.
“The reality is that the next steps in front of us are highly technical issues that are not susceptible to an easy solution,” Frazier said. “Complicated bills are generally developed over an extended period of time, over multiple iterations, and sometimes that can take years.”
Newsom had even gotten into the debate over insurance costs with a trailer bill that would have held the department to strict deadlines when reviewing insurers’ requests to change their prices. But before the bill could be formally introduced, Lara announced the department would implement that change.
Other efforts tangential to home insurance got more traction. The Legislature passed SB867, which placed Proposition 4 on the ballot in November. If passed by voters, Prop. 4 would authorize a $10 billion climate bond, including $1.5 billion in funding for wildfire and forest resilience.
“That is a really huge sign that California is committed to mitigation, and insurance companies have to start taking that to heart,” Balber said.
Several bills sponsored by Lara and the department also passed both houses and are awaiting Newsom’s signature. They include proposals to expand coverage for fertility treatments and increase compensation for the department’s insurance fraud investigators.
Becker said that the Senate is working on “big picture” changes on insurance, but expressed optimism that Lara’s proposed changes would help to stabilize the industry first, which Becker said is “not a bad game plan.”
Senate President Pro Tem Mike McGuire, who has indicated he may run for insurance commissioner in 2026 and formed the Senate Insurance Working Group, seconded the need for legislative action, while applauding Lara’s Sustainable Insurance Strategy. McGuire said that California has made “record investments” in reducing wildfire risk, but that insurance companies remain a problem.
“Despite all this work and investment, insurance companies are still denying tens of thousands of California homeowners from getting traditional insurance or charging them exorbitant rates. It’s unacceptable,” McGuire said in a statement.
